Calgary’s Bold Office-to-Housing Conversion Initiative: Is It Working?

For years, Calgary has wrestled with a pressing challenge: revitalizing its downtown core. Mark Garner, president of the Calgary Downtown Association, recently emphasized the city’s transformation, calling the West End “the place to be.” His statement marks a significant shift from the struggles Calgary’s downtown faced over the past decade, especially as office vacancies soared following the 2014 oil crash and the pandemic-induced work-from-home boom.

Between 2014 and 2021, office vacancy rates climbed from 9.8% to a staggering 33%, leaving Calgary’s downtown in what urban theorists call a ‘doom loop’—a cycle in which businesses vacate offices, reducing foot traffic, hurting local businesses, and making downtown even less desirable. Compounding this issue was Calgary’s worsening housing crisis, with the vacancy rate dropping from 5.1% in 2021 to just 1.4% in 2023, driving up housing costs and reducing affordability.

Faced with these twin crises, the city took an unprecedented step in 2021, approving a $200 million revitalization plan that included converting office spaces into residential units. But nearly four years in, how effective has this strategy been?

A Pioneering Plan to Reshape Downtown

The city’s Greater Downtown Plan, backed by $200 million in funding, aimed to address housing shortages and economic stagnation. Of this, $153 million was allocated to incentivize office-to-residential conversions. The plan sought to remove six million square feet of office space by 2031, primarily through conversions.

Developers responded with enthusiasm, with the first round of funding fully allocated to 13 projects, and a second round in 2023 adding $52.5 million in funding. Importantly, developers only receive city funding upon completion, ensuring taxpayer dollars are safeguarded.

Early Successes and International Recognition

The first project, an affordable housing initiative by non-profit developer Homespace, converted an office building into a residential space in just one year. The project included two floors designated for the family shelter Inn From the Cold. This success drew international attention, with the Washington Post and the San Francisco Chronicle citing Calgary’s approach as a potential model for U.S. cities struggling with similar challenges.

Today, two major conversions—Cornerstone (112 suites) and HAT at Eau Claire (87 rental units)—are already available, with a third, a 195-unit premium rental complex, opening in summer 2024. Additionally, three more residential buildings are slated for completion by 2028, bringing Calgary’s total investment to $20 million and leveraging $350 million in private funding.

With nine more conversions in the works—six expected to be completed this year and the remainder by 2026—the initiative is gaining momentum. Mayor Jyoti Gondek emphasized the program’s importance, stating, “These investments matter because they build up our tax base… allowing follow-on investments in public safety, roads, and recreation.”

Challenges and Setbacks

Despite its promising trajectory, Calgary’s office conversion program has not been without hurdles.

Structural and Design Challenges: Office buildings are not inherently suited for residential use. Developers must navigate issues such as floor plate sizes, plumbing and electrical systems, insulation, and access to daylight. Some buildings are simply too costly or complex to retrofit, leading at least one developer to withdraw from the program.

Cost Overruns and Construction Delays: The historic Barron Building, for example, saw its projected conversion costs double. As Bill Black, president of the Calgary Construction Association, noted, “There’s so many things that can lurk beneath the surface that you’re not aware of until you get going.” Rising construction costs, supply chain disruptions, and tariff threats from the U.S. have further complicated the process.

Is It Working? A Mixed but Promising Picture

While conversions alone won’t solve Calgary’s housing crisis or eliminate office vacancies, they are making a measurable impact. By the third quarter of 2024, office vacancy rates had declined to 23.3%, down from 33% in 2021. Meanwhile, the city’s overall rental housing vacancy rose from 1.4% in 2023 to 4.8% in 2024, helping to stabilize rent prices.

The initiative also plays a key role in repositioning Calgary as a dynamic, livable city. “If we hadn’t started this four years ago, we would be far behind where we need to be right now,” Mayor Gondek stated. However, experts remain cautious about declaring the program an outright success. Greg Kwong, Alberta region managing director for Coldwell Banker Richard Ellis, pointed out that the initiative is still in its early stages, and ongoing funding and policy support will be necessary for long-term success.

The Path Forward

Calgary’s bold experiment in office-to-housing conversions offers valuable lessons for cities worldwide grappling with vacant commercial space and housing shortages. The program has demonstrated that, with the right incentives and planning, adaptive reuse of office buildings can contribute meaningfully to downtown revitalization. However, challenges remain, and continuous adjustments will be necessary to ensure its viability.

As the city moves forward, the success of the program will hinge on balancing incentives with pragmatic expectations. While not a silver bullet, the initiative is proving to be a valuable tool in reshaping Calgary’s downtown, making it a more vibrant and livable space for future generations.

Based on an article in the Calgary Herald on March 12, 2025 and written by Hiren Mansukhani.